The Walt Disney Company Reports Fourth Quarter and Full Year Earnings
for Fiscal 2013

Revenues for the year increased 7% to a record $45.0 billion.

EPS for the year increased 8% to a record $3.38 compared to $3.13 in
the prior year.

Net income(1) for the year increased 8% to a record $6.1
billion.

November 07, 2013 04:15 PM Eastern Standard Time

BURBANK, Calif.--(BUSINESS WIRE)--The Walt Disney Company (NYSE: DIS) today reported earnings for its
fourth quarter and fiscal year ended September 28, 2013. Diluted
earnings per share (EPS) for the quarter increased 13% to $0.77 from
$0.68 in the prior-year quarter. For the year, diluted EPS increased 8%
to $3.38 from $3.13 in the prior year. Excluding certain items affecting
comparability, EPS for the year increased 10% to $3.39 compared to $3.07
in the prior year. For the quarter, items affecting comparability had no
net effect on year-over-year growth.

“We’re extremely pleased with our results for Fiscal 2013, delivering
record revenue, net income and earnings per share for the third year in
a row,” said Robert A. Iger, Chairman and CEO, The Walt Disney Company.
“It was another great year for the Company, both creatively and
financially, and we remain confident that we are well positioned to
continue our strong performance and drive long-term shareholder value.”

The following table summarizes the fourth quarter and full year results
for fiscal 2013 and 2012 (in millions, except per share amounts):

Quarter Ended

Year Ended

Sept. 28,2013

Sept. 29,2012

Change

Sept. 28,2013

Sept. 29,2012

Change

Revenues

$

11,568

$

10,782

7

%

$

45,041

$

42,278

7

%

Segment operating income(2)

$

2,484

$

2,339

6

%

$

10,724

$

9,964

8

%

Net income(1)

$

1,394

$

1,244

12

%

$

6,136

$

5,682

8

%

Diluted EPS(1)

$

0.77

$

0.68

13

%

$

3.38

$

3.13

8

%

Cash provided by operations

$

2,735

$

1,535

78

%

$

9,452

$

7,966

19

%

Free cash flow(2)

$

1,748

$

602

>100

%

$

6,656

$

4,182

59

%

(1)

Reflects amounts attributable to shareholders of The Walt Disney
Company, i.e. after deduction of noncontrolling interests.

(2)

Aggregate segment operating income and free cash flow are non-GAAP
financial measures. See the discussion of non-GAAP financial
measures that follows.

SEGMENT RESULTS

The following table summarizes the full year and fourth quarter segment
operating results for fiscal 2013 and 2012 (in millions):

Quarter Ended

Year Ended

Sept. 28,2013

Sept. 29,2012

Change

Sept. 28,2013

Sept. 29,2012

Change

Revenues:

Media Networks

$

4,946

$

4,881

1

%

$

20,356

$

19,436

5

%

Parks and Resorts

3,716

3,425

8

%

14,087

12,920

9

%

Studio Entertainment

1,506

1,402

7

%

5,979

5,825

3

%

Consumer Products

1,004

883

14

%

3,555

3,252

9

%

Interactive

396

191

>100

%

1,064

845

26

%

$

11,568

$

10,782

7

%

$

45,041

$

42,278

7

%

Segment operating income (loss):

Media Networks

$

1,442

$

1,571

(8

)%

$

6,818

$

6,619

3

%

Parks and Resorts

571

497

15

%

2,220

1,902

17

%

Studio Entertainment

108

80

35

%

661

722

(8

)%

Consumer Products

347

267

30

%

1,112

937

19

%

Interactive

16

(76

)

nm

(87

)

(216

)

60

%

$

2,484

$

2,339

6

%

$

10,724

$

9,964

8

%

Media Networks

Media Networks revenues for the quarter increased 1% to $4.9 billion and
segment operating income decreased 8% to $1.4 billion. For the year,
revenues increased 5% to $20.4 billion and segment operating income
increased 3% to $6.8 billion. The following table provides further
detail of the Media Networks results (in millions):

Quarter Ended

Year Ended

Sept. 28,2013

Sept. 29,2012

Change

Sept. 28,2013

Sept. 29,2012

Change

Revenues:

Cable Networks

$

3,573

$

3,535

1

%

$

14,453

$

13,621

6

%

Broadcasting

1,373

1,346

2

%

5,903

5,815

2

%

$

4,946

$

4,881

1

%

$

20,356

$

19,436

5

%

Segment operating income:

Cable Networks

$

1,284

$

1,379

(7

)%

$

6,047

$

5,704

6

%

Broadcasting

158

192

(18

)%

771

915

(16

)%

$

1,442

$

1,571

(8

)%

$

6,818

$

6,619

3

%

Cable Networks

Results for the Quarter

Operating income at Cable Networks decreased $95 million to $1.3 billion
for the quarter. The decrease in operating income was driven by a
reduction of $172 million in the recognition of previously deferred ESPN
affiliate fee revenues related to annual programming commitments. Absent
this impact, operating income would have increased by $77 million driven
by affiliate fee contractual rate increases at ESPN and the domestic
Disney Channels and higher advertising revenue at ESPN, partially offset
by higher programming and production costs. ESPN advertising revenues
increased primarily due to an increase in units delivered and higher
rates. The increase in programming and production costs was due to the
addition of new college football rights, contractual rate increases for
NFL, Major League Baseball (MLB) and college football rights and more
episodes of original programming at the domestic Disney Channels.

Results for the Year

For the year, operating income at Cable Networks increased $343 million
to $6.0 billion due to growth at ESPN, the domestic Disney Channels and
A&E Television Networks (AETN). Growth at ESPN was due to increased
affiliate and advertising revenues, partially offset by increased
programming and production costs. Affiliate revenue improvement at ESPN
was due to contractual rate increases and, to a lesser extent,
international subscriber growth. ESPN advertising revenue growth was
primarily due to an increase in units delivered and higher rates,
partially offset by lower ratings. The increase in programming and
production costs was due to contractual rate increases for college
sports, NFL, MLB and NBA rights, production costs for new X Games events
and the addition of new college football rights. Domestic Disney
Channels growth was due to higher affiliate revenues from contractual
rate increases, partially offset by higher programming costs driven by
more episodes of original programming. Higher equity income from AETN
reflected advertising and affiliate revenue growth, along with the
benefit of the increase in the Company's ownership interest from 42% to
50%.

Broadcasting

Results for the Quarter

Operating income at Broadcasting decreased $34 million to $158 million
for the quarter due to higher primetime programming costs, an
unfavorable comparison to syndication sales of Castle and Wipeout
in the prior year and higher marketing costs for the fall season,
partially offset by advertising and affiliate revenue growth. Higher
primetime programming costs were driven by an increase in the average
cost per hour due to a shift of hours from lower cost reality and
primetime news to higher cost original scripted programming. Higher
affiliate revenues were due to contractual rate increases and new
contractual provisions. Growth in advertising revenue was due to higher
units delivered at the ABC Television Network, increased Network rates
and growth in online advertising, partially offset by lower primetime
ratings and the absence of the Emmys, which was broadcast by ABC
in the prior-year quarter.

Results for the Year

For the year, operating income at Broadcasting decreased $144 million to
$771 million due to higher primetime programming costs and lower program
sales, partially offset by higher affiliate and advertising revenues.
Primetime programming costs reflected an increase in the average cost
per hour as a result of a shift in hours from lower cost reality and
primetime news to higher cost original scripted programming. The decline
in program sales reflected higher sales in the prior year for Desperate
Housewives,Castle and Grey's Anatomy, partially
offset by current year increases for Scandal, Revenge and Once
Upon a Time. Affiliate revenues benefited from contractual rate
increases and new contractual provisions. Growth in advertising revenues
was due to higher units delivered at the ABC Television Network,
increased Network rates and growth in online advertising, partially
offset by lower primetime ratings.

Parks and Resorts

Parks and Resorts revenues for the quarter increased 8% to $3.7 billion
and segment operating income increased 15% to $571 million. For the
year, revenues increased 9% to $14.1 billion and segment operating
income increased 17% to $2.2 billion.

Results for the Quarter

Results for the quarter reflected growth at our domestic parks and
resorts, an increase in vacation club ownership sales and higher royalty
revenue from Tokyo Disney Resort, partially offset by a decrease at
Disneyland Paris.

Higher operating income at our domestic parks and resorts was primarily
due to increased guest spending, attendance and occupied room nights at
Walt Disney World Resort and increased guest spending at Disneyland
Resort. These increases were partially offset by higher costs at both
resorts and lower attendance at Disneyland Resort, which reflected the
success in the prior year from the opening of Cars Land at Disney
California Adventure. Increased guest spending at our domestic parks was
due to higher average ticket prices, food, beverage and merchandise
spending and average daily hotel room rates. Higher costs were due to
spending on MyMagic+ and labor and other cost inflation.

For the year, operating income growth reflected increases at our
domestic parks and resorts, Disney Vacation Club and Hong Kong
Disneyland Resort, partially offset by a decrease at Disneyland Paris
and higher pre-opening costs at Shanghai Disney Resort.

Operating income growth at our domestic parks and resorts was due to
increased guest spending, attendance and occupied room nights, partially
offset by higher costs. Increased guest spending was due to higher
average ticket prices, food, beverage and merchandise spending and
average daily hotel room rates. Cost increases were driven by spending
on new guest offerings and labor and other cost inflation. Significant
new guest offerings included MyMagic+, the expansions of Disney
California Adventure and the Magic Kingdom at Walt Disney World Resort
and Disney's Art of Animation Resort. The increase at Disney Vacation
Club was primarily driven by sales of The Villas at Disney's Grand
Floridian Resort & Spa, which is a higher margin property.

Operating income growth at Hong Kong Disneyland Resort was due to higher
guest spending and attendance, partially offset by higher costs driven
by resort expansion and labor and other cost inflation. At Disneyland
Paris, increased guest spending was more than offset by lower
attendance, fewer occupied room nights and labor and other cost
inflation. Increased guest spending at our international resorts was due
to higher average ticket prices, the opening of the World of Disney
store in July 2012 at Disneyland Paris and increased average daily hotel
room rates.

Studio Entertainment

Studio Entertainment revenues for the quarter increased 7% to $1.5
billion and segment operating income increased $28 million to $108
million. For the year, revenues increased 3% to $6.0 billion and segment
operating income decreased $61 million to $661 million.

Results for the Quarter

The increase in operating income for the quarter was primarily due to
improved theatrical results and growth from television/subscription
video on demand (TV/SVOD) distribution, partially offset by a decrease
in home entertainment and higher film impairments. The increase in
theatrical results was primarily due to the strength of Monsters
University in the current quarter compared to Brave in the
prior-year quarter, partially offset by the performance of The Lone
Ranger in the current quarter. The increase in TV/SVOD distribution
was driven by the timing of title availabilities and SVOD sales of
library titles in the current quarter. Lower home entertainment results
reflected decreased unit sales driven by the performance of Iron Man 3
in the current quarter compared to Marvel's The Avengers in the
prior-year quarter, partially offset by lower marketing and overhead
costs. Higher film impairments were driven by the write-down of The
Lone Ranger in the current quarter, partially offset by a
development cost write-off in the prior-year quarter.

Results for the Year

For the year, the decrease in operating income was primarily due to a
decrease in home entertainment results, partially offset by an increase
in SVOD sales of library titles and lower film impairments. Lower home
entertainment results were driven by decreased unit sales reflecting the
performance of Brave, Iron Man 3,Wreck-It Ralph
and Cinderella Diamond Release in the current year compared to
Marvel's The Avengers,Cars 2 and The Lion King Diamond
Release in the prior year along with lower catalog sales. Lower film
impairments were due to the write-down of The Lone Ranger in the
current year compared to the write-down of John Carter and higher
development cost write-offs in the prior year. Theatrical distribution
results were essentially flat year over year as increased revenues were
offset by incremental distribution and production cost amortization. A
key driver of the revenue and cost increase was the release of two
Disney animated features, Wreck-It Ralph and Planes in the
current year versus none in the prior year. Other significant titles in
release during the year included Iron Man 3, Monsters
University and Oz The Great and Powerful compared to Marvel's The
Avengers, Brave and The Muppets in the prior year.

Consumer Products

Consumer Products revenues for the quarter increased 14% to $1.0 billion
and segment operating income increased 30% to $347 million. For the
year, revenues increased 9% to $3.6 billion and segment operating income
increased 19% to $1.1 billion.

Results for the Quarter

Higher operating income for the quarter was due to increases at our
Merchandise Licensing and Publishing businesses. The increase at
Merchandise Licensing was driven by the performance of Planes, Monsters
University and Disney Junior merchandise. Merchandise Licensing
results also increased due to the inclusion of Lucasfilm. At Publishing,
higher operating income for the quarter was primarily due to
international sales of books based on Disney Channel properties.

Results for the Year

For the year, the increase in operating income was due to growth at our
Merchandise Licensing, Retail and Publishing businesses. The increase at
Merchandise Licensing was driven by the performance of Disney Junior, Monsters
University, Mickey and Minnie, Iron Man and Planes
merchandise, partially offset by lower earned revenue from Cars and
Winnie the Pooh merchandise. Merchandise Licensing results also
increased due to the inclusion of Lucasfilm.

At our Retail business, higher operating income for the year was due to
comparable store sales growth in North America and Japan and higher
online sales in North America. At Publishing, higher operating income
for the year was due to the strength of Marvel comics.

Interactive

Interactive revenues for the quarter increased by $205 million to $396
million and segment operating results improved from a loss of $76
million to income of $16 million. For the year, revenues increased 26%
to $1.1 billion and segment operating results improved by $129 million
to a loss of $87 million.

Improved operating results for the quarter and year were due to
increases at our console games and Japan mobile businesses. The increase
at our console games business was primarily due to the fourth quarter
release of Disney Infinity. Japan mobile results benefited from
the full year impact of a licensing agreement that started in February
2012, which drove an increase in handset sales and subscribers for the
year and quarter. The increases for the quarter were partially offset by
a decrease at our social games business due to a favorable acquisition
accounting adjustment recognized in the prior-year quarter.

OTHER FINANCIAL INFORMATION

Corporate and Unallocated Shared Expenses

Corporate and unallocated shared expenses increased $24 million to $164
million for the quarter and increased $57 million to $531 million for
the year. The increase for the quarter reflects higher charitable
contributions, timing of allocations to operating segments and higher
labor costs. The increase for the year reflects higher labor costs and
charitable contributions.

Net Interest Expense

Net interest expense was as follows (in millions):

Quarter Ended

Year Ended

Sept. 28,2013

Sept. 29,2012

Change

Sept. 28,2013

Sept. 29,2012

Change

Interest expense

$

(81

)

$

(115

)

30

%

$

(349

)

$

(472

)

26

%

Interest and investment income

55

24

>100

%

114

103

11

%

Net interest expense

$

(26

)

$

(91

)

71

%

$

(235

)

$

(369

)

36

%

The decrease in interest expense for the quarter and year was due to
lower effective interest rates. The increase in interest and investment
income for the quarter was due to gains from the sales of investments.
The increase in interest and investment income for the year was due to
gains from the sale of investments, partially offset by higher
write-downs of investments.

Income Taxes

The effective income tax rate was as follows:

Quarter Ended

Year Ended

Sept. 28,2013

Sept. 29,2012

Change

Sept. 28,2013

Sept. 29,2012

Change

Effective Income Tax Rate

30.6%

34.2%

3.6

ppt

31.0%

33.3%

2.3

ppt

The decrease in the effective income tax rate for the quarter was driven
by favorable tax adjustments related to pre-tax earnings in prior years
and the impact of changes in our full year effective income tax rate
relative to our estimate at the end of the third quarter. This impact
was slightly favorable in the current quarter, whereas it was
unfavorable in the prior-year quarter.

The decrease in the effective income tax rate for the year was primarily
due to favorable tax adjustments related to pre-tax earnings in prior
years.

Cash Flow

Cash provided by operations and free cash flow were as follows (in
millions):

Year Ended

Sept. 28,2013

Sept. 29,2012

Change

Cash provided by operations

$

9,452

$

7,966

$

1,486

Investments in parks, resorts and other property

(2,796

)

(3,784

)

988

Free cash flow(1)

$

6,656

$

4,182

$

2,474

(1)

Free cash flow is not a financial measure defined by GAAP. See the
discussion of non-GAAP financial measures that follows.

Cash provided by operations for fiscal 2013 increased 19% or $1.5
billion to $9.5 billion as compared to fiscal 2012. The increase in cash
provided by operations was primarily due to higher segment operating
results, lower pension contributions and the prior-year payment of
interest accrued on Disneyland Paris borrowings, partially offset by the
payment related to the Celador litigation in the third quarter of the
current year.

Capital Expenditures and Depreciation Expense

Investments in parks, resorts and other property were as follows (in
millions):

Year Ended

Sept. 28,2013

Sept. 29,2012

Media Networks

Cable Networks

$

176

$

170

Broadcasting

87

85

Total Media Networks

263

255

Parks and Resorts

Domestic

1,140

2,242

International

970

641

Total Parks and Resorts

2,110

2,883

Studio Entertainment

78

79

Consumer Products

45

69

Interactive

13

27

Corporate

287

471

Total investments in parks, resorts and other property

$

2,796

$

3,784

Capital expenditures decreased from $3.8 billion to $2.8 billion due to
decreases at Parks and Resorts and Corporate. The decrease at Parks and
Resorts was primarily due to higher spending in the prior year, which
included the final progress payment for the Disney Fantasy cruise
ship, the expansion of Disney California Adventure, the construction of
Disney's Art of Animation Resort and development of MyMagic+,
compared to the current year, which included construction of the
Shanghai Disney Resort. The decrease at Corporate reflected higher
spending in the prior year for corporate facilities and information
technology infrastructure.

Depreciation expense was as follows (in millions):

Year Ended

Sept. 28,2013

Sept. 29,2012

Media Networks

Cable Networks

$

139

$

141

Broadcasting

99

100

Total Media Networks

238

241

Parks and Resorts

Domestic

1,041

927

International

327

314

Total Parks and Resorts

1,368

1,241

Studio Entertainment

54

48

Consumer Products

57

55

Interactive

20

17

Corporate

220

182

Total depreciation expense

$

1,957

$

1,784

Non-GAAP Financial Measures

This earnings release presents EPS excluding the impact of certain
items, free cash flow and aggregate segment operating income, all of
which are important financial measures for the Company but are not
financial measures defined by GAAP.

These measures should be reviewed in conjunction with the relevant GAAP
financial measures and are not presented as alternative measures of EPS,
cash flow or net income as determined in accordance with GAAP. EPS
excluding certain items, free cash flow and aggregate segment operating
income as we have calculated them may not be comparable to similarly
titled measures reported by other companies.

EPS excluding certain items – The Company
uses EPS excluding certain items to evaluate the performance of the
Company’s operations exclusive of certain items that impact the
comparability of results from period to period. The Company believes
that information about EPS exclusive of these impacts is useful to
investors, particularly where the impact of the excluded items is
significant in relation to reported earnings, because the measure allows
for comparability between periods of the operating performance of the
Company’s business and allows investors to evaluate the impact of these
items separately from the impact of the operations of the business.

Tax benefit from prior-year foreign earnings indefinitely reinvested
outside the United States

(0.02

)

—

nm

(0.06

)

—

nm

Restructuring and impairment charges(1)

0.03

0.02

50

%

0.07

0.03

>100

%

Other income/(expense), net(2)

(0.01

)

(0.03

)

67

%

0.03

(0.09

)

nm

Hulu Equity Redemption

charge(3)

—

—

nm

0.02

—

nm

Diluted EPS excluding certain items(4)

$

0.77

$

0.68

13

%

$

3.39

$

3.07

10

%

(1)

Charges for the current year totaled $214 million and consisted of
$186 million of severance and contract and lease termination charges
(of which $79 million was recorded in the current quarter) and $28
million of intangible and other asset impairment charges (of which
$14 million was recorded in the current quarter). Charges for the
prior year totaled $100 million and consisted of $78 million of
severance and lease termination charges (of which $35 million was
recorded in the fourth quarter of the prior year) and $22 million
for intangible and other asset impairment charges (of which $14
million was recorded in the fourth quarter of the prior year).

(2)

The current year includes a charge related to the Celador litigation
($321 million), partially offset by gains on the sale of our 50%
interest in ESPN STAR Sports and various businesses ($252 million,
of which $23 million was recorded in the current quarter). The prior
year includes a non-cash gain recorded in connection with the
acquisition of a controlling interest in UTV Software Communications
Limited ($184 million) and the recovery of a receivable from Lehman
Brothers that was written off in 2008 as a result of the Lehman
bankruptcy ($79 million, all of which was recorded in the prior-year
quarter), partially offset by a net charge related to the
refinancing of Disneyland Paris borrowings ($24 million, all of
which was recorded in the prior-year quarter).

Free cash flow – The Company uses free cash
flow (cash provided by operations less investments in parks, resorts and
other property), among other measures, to evaluate the ability of its
operations to generate cash that is available for purposes other than
capital expenditures. Management believes that information about free
cash flow provides investors with an important perspective on the cash
available to service debt, make strategic acquisitions and investments
and pay dividends or repurchase shares.

Aggregate segment operating income – The
Company evaluates the performance of its operating segments based on
segment operating income, and management uses aggregate segment
operating income as a measure of the performance of operating businesses
separate from non-operating factors. The Company believes that
information about aggregate segment operating income assists investors
by allowing them to evaluate changes in the operating results of the
Company’s portfolio of businesses separate from non-operational factors
that affect net income, thus providing separate insight into both
operations and the other factors that affect reported results.

A reconciliation of segment operating income to net income is as follows
(in millions):

Quarter Ended

Year Ended

Sept. 28,2013

Sept. 29,2012

Sept. 28,2013

Sept. 29,2012

Segment operating income

$

2,484

$

2,339

$

10,724

$

9,964

Corporate and unallocated shared expenses

(164

)

(140

)

(531

)

(474

)

Restructuring and impairment charges

(93

)

(49

)

(214

)

(100

)

Other income/(expense), net

23

55

(69

)

239

Net interest expense

(26

)

(91

)

(235

)

(369

)

Hulu Equity Redemption charge

—

—

(55

)

—

Income before income taxes

2,224

2,114

9,620

9,260

Income taxes

(681

)

(724

)

(2,984

)

(3,087

)

Net income

$

1,543

$

1,390

$

6,636

$

6,173

CONFERENCE CALL INFORMATION

In conjunction with this release, The Walt Disney Company will host a
conference call today, November 7, 2013, at 5:00 PM EST/2:00 PM PST via
a live Webcast. To access the Webcast go to www.disney.com/investors.
The discussion will be available via replay through November 14, 2013 at
7:00 PM EST/4:00 PM PST.

FORWARD-LOOKING STATEMENTS

Management believes certain statements in this earnings release may
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are
made on the basis of management’s views and assumptions regarding future
events and business performance as of the time the statements are made.
Management does not undertake any obligation to update these statements.

Actual results may differ materially from those expressed or
implied. Such differences may result from actions taken by the Company,
including restructuring or strategic initiatives (including capital
investments or asset acquisitions or dispositions), as well as from
developments beyond the Company’s control, including: